PBS Missing A Chance To Exploit Big Bird

As far as political ads go, President Obama has an easy one waiting for him. With Gov. Romney’s pledge to cut federal funding for PBS, an irresistibly cute girl nearing tears should ask:
“Mommy, will that man really take ‘Sesame Street’ away from me?”

While the topic was more serious, the inspiration would of course be Lyndon Johnson’s famed
“Daisy” ad in 1964, where a young girl surrounded by flowers was used to illustrate the danger of nuclear weapons.

Gov. Romney engaged in pandering in a debate last
week when he said he loved Big Bird, but didn’t want to borrow from the Chinese to fund PBS. People are making a big deal out of it, but conservative politicians have played the PBS card for
years when talking about ways to reduce the federal deficit. They’d have voters think: “If we stop giving liberals their own TV network, then we can get our fiscal house in
order.”

The federal money funding PBS (and NPR) is significant -- it could hire a lot of teachers -- but slashing it entirely would hardly help the U.S. economy. The $430 million is
infinitesimal within the multi-trillion-dollar budget. PBS executives were quick to point that out after Gov. Romney went after Big Bird.

Still, whether the federal government should be
funding PBS is worthy of a debate. There are aspects of the Corporation for Public Broadcasting’s initial charter in the 1960s that arguably are being fulfilled elsewhere today.

But
before legislators -- or a new president -- consider the macro issue of dropping funding, there is a step that could save the government big money: take action to allow PBS to collect carriage
fees.

In the last few years, local stations have begun raking it in through the fees from Comcast, DirecTV, Verizon and a slew of other loaded pay-TV distributors. That revenue stream --
retransmission consent fees -- is waiting for PBS to tap.

If Comcast or DirecTV opts not to offer PBS, let them receive the letters and the public scorn for depriving American children of Big
Bird. And see how quickly they move to give PBS a tidy fee.

The problem is that the law and FCC rules prevent PBS from collecting the easy money. The reasons are sound -- make sure every
American has access to PBS -- but they are a vestige of another era.

CBS, News Corp. and Disney have figured that out and are getting richer. Okay -- they aren’t exactly non-profits. But
Congress could produce a win-win by opening the door for PBS. Then PBS would need fewer tax dollars, while its mission and programming would be unaffected. (Not a bad message to offer constituents
about creative leadership.)

PBS executives who are eager to keep their government funding should lobby Congress to make the move. In a June report the CPB commissioned for Congress, the case
is laid out perfectly.

Congress requested the report looking for alternative sources of revenue for PBS in place of federal funding. Booz & Co. conducted the research and found five new
avenues, including retransmission consent payments. But the consulting firm concluded that none of them offered "a realistic opportunity” to generate the revenue” that “could replace
or significantly reduce” the federal subsidy.

Booz is right as things stand. The report notes that under the Communications Act and FCC rules, commercial stations can choose one of two
options for carriage via multichannel video programming distributors (MVPD): “must carry” or the retransmission consent payments.

A station can elect the “must carry”
approach, where the MVPDs are required to carry it. If it goes with the retransmission consent option, however, it has to negotiate with MVPDs for compensation in turn for distribution. Without a deal
there, an MVPD can opt not to carry it.

Yet the law and FCC limit PBS stations to the “must carry” option. This needs to change swiftly. Taxpayers should demand it. Deficit hawks
should feel free to blast away at PBS, but change this while carping.

But Booz & Co. mistakenly pours cold water on altering the law. It suggests that PBS stations have scant leverage to
nudge MVPDs to pay them. It also writes that getting the dollars requires a willingness to risk a station blackout, which is “antithetical” to the PBS mission of “universal
service.”

Yet Booz offers an analysis that takes into account these potential hurdles and still predicts that PBS could collect between $32 million and $121 million.

Booz also
suggests that small PBS stations lack the resources to negotiate the carriage deals in their markets, so a central PBS entity would need to be established that would cost $9-plus million in start-up
fees and about $5 million annually.

Let’s get this straight: PBS could bring in $27 million a year at a minimum (after start-up costs) and as much as $116 million and the door needs to
be shut? Forget it?

It’s very likely Booz’s estimates are on the low end -- again, just watch the explosion when an MVPD ditches Big Bird. But even so, any money PBS collects would
be more than the zero now. Under the $121 million scenario, PBS could reduce its federal subsidy by perhaps 30%.

As it moves more aggressively into landing commercial sponsorships, PBS has
shown a willingness to act more like a for-profit operation, while not compromising its ethic. Pursuing carriage payments would follow the same framework. PBS should welcome the chance to flex its
entrepreneurial muscle even more. Congress is a sucker for entrepreneurialism and skeptics might at least warm to it a little.